South Australia takes on the nation’s banks with new tax

South Australia will impose its own tax on the big four banks and Macquarie Group, arguing banks are under-taxed and a legitimate source of revenue for states.

The SA government led by Premier Jay Weatherill, who has long argued for financial services to be subject to GST, on Thursday announced the shock levy, that is forecast to raise $370 million over the next four years.

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Treasurer Tom Koutsantonis said the tax would be structured in the same way as the federal government’s levy, which passed the Senate this week.

However, it will apply only to a share of bank liabilities equal to the state’s share of the national economy.

SA Treasurer Tom Koutsantonis said banks were very profitable and under-taxed.

“The levy will be charged quarterly at a rate of 0.015 per cent on South Australia’s share of liabilities subject to the Commonwealth Major Bank Levy. Our state’s share of liabilities will be determined based on the South Australian share of the national economy,” he said in his budget speech.

“The banking sector is very profitable and a Major Bank Levy is a fair and reasonable approach to ensuring the sector contributes its fair share.”

It will apply to Commonwealth Bank, National Australia Bank, ANZ Bank, Westpac and Macquarie Group.

Mr Koutsantonis noted in his speech that Mr Weatherill had previously argued for higher taxes on banking at Council of Australian Governments, and that states used to tax banks but gave this practice up in exchange for revenue from the GST.

“Reports show that financial services are significantly undertaxed by more than $4 billion per annum because their GST treatment differs from other industries,” he said.

“States previously applied taxes to banks and the financial sector, yet gave those revenue streams up as part of the introduction of the GST. Reports show that financial services are significantly undertaxed by more than $4 billion per annum because their GST treatment differs from other industries.”